Covid-19 has turned the world upside down and challenged different sectors, with the food and drink industry being one of the most affected. Alone in the soft drink sector the pandemic resulted in 20 to 30% drops in sales in 2020, due to closed restaurants, bars and travel restrictions. However, the pandemic also brought new opportunities. At a time of evolving consumer preferences and increasing public health expectations, UNESDA’s members have made a series of commitments and plans to adapt to a changing social environment.
We spoke to Nicholas Hodac, the director general of UNESDA Soft Drinks Europe, to hear about the current situation, challenges, opportunities, and the general outlook of the industry in the coming months and years. Hodac joined UNESDA just a few months before the beginning of the pandemic, in October 2019. What a timing. He previously held positions as Government Affairs Executive at IBM Europe and Head of the Brussels EU Affairs Office for Ford Europe.
Could you share with our readers what UNESDA does? What are its goals?
UNESDA is the European association representing the soft drinks industry. Soft drinks are basically any non-alcoholic drink, excluding water, juice and milk. Flavoured waters are, however, part of it.
The association includes 23 national federations, as well as 9 corporate companies, like Coca Cola, Pepsi, Red Bull, and other big names. It ensures that its members’ views and opinions, suggestions and concerns are taken into account by the European institutions and translated into the right policies.
We have two main goals: sustainability and responsibility. Our industry wants to offer good and environmentally friendly packaging solutions, and at the same time show responsibility in terms of health and nutrition. We work towards this by reducing sugar levels, improving ingredients, and adjusting marketing operations, especially with regard to children. Both these pillars are guided by an overarching pillar: competitiveness. Competitiveness in the sense of broader fiscal matters, funding and also supporting and enhancing the growth of the industry.
How has the pandemic affected the soft drinks business in Europe and beyond? Was there a substantial drop in sales toward bars and restaurants but an increase in sales through supermarkets?
Definitely. Overall, the industry saw a drop of 20-30% at the end of 2020. The reason for this was closed restaurants, bars, harder restrictions in some countries, softer restrictions in others. It was a sudden drop not only in Europe, but also beyond. Of course, some of the out of home sales were compensated by home consumption, but this was by far not enough to buffer the drop. Looking at the positive side, this also allowed us to explore new channels and see an opportunity in the situation, e-commerce being a big part of that.
What are UNESDA’s current strategy in terms of the Sustainable Development Goals (SDGs)? What are the main challenges?
Packaging is definitely one of our priorities, in particular to achieve fully circular packaging for our beverages. We want bottle to bottle recycling throughout the industry, completely eliminating waste so that bottles get reused over and over. Basically removing the plastic bottle from the waste equation. All this we wrote down in our circular packaging vision 2030, a guiding document for our members’ operations.
Another priority around the SDGs is a healthier lifestyle and balanced diet. Soft drinks is indeed one of the contributors to the population’s sugar intake. Although we are not the main contributors to sugar consumption as recent data reveals, and therefore other food categories also need to act, it’s our responsibility to address this in an appropriate way. We are constantly working to have a positive impact, as well as enabling moderate consumption, and helping people in making healthier choices. This is done in four steps; one, is to replace sugar with low calorie sweeteners, another is to introduce new products that consumers like, but which contain healthier ingredients, such as flavoured waters. Then, we also work on reducing packaging sizes, in order to moderate the consumption of certain beverages. A final and very important part is the way we advertise and conduct marketing operations, namely by shifting the focus to no and low calorie soft drinks.
UNESDA has announced a commitment to reduce added sugars in its beverages by another 10% by 2025? Could you share some details on how this will be accomplished? Will consumers have to readjust their taste? How will the formulas be redesigned?
Yes, indeed. It is important to know, though, that these 10% are an average reduction of the whole industry, not in every single drink. Also, reducing average added sugars by a further 10% will add up to a total decrease of 33% over the last two decades, when we started to stepwise lower sugar percentages. This has been a voluntary reaction to a call made by the European Commission, back in 2015. UNESDA were the only ones to respond to this call and to lower added sugars levels by 10% on average by 2020. We achieved 14.6% by 2019 and now we’re on the way to cut down average added sugars by another 10% by 2025.
Fulfilling this is a crucial step in achieving our goals. However, we also need to listen to our consumers. We want to remove sugar, but at the same time we don’t want to compromise on the taste. This really is a slow, and progressive journey, one which consumers should want to join. Therefore, we need to make sure that the alternatives we offer are tasteful, too.
Why 10%? Could it potentially be more?
As mentioned, this is a gradual transition. Overall, it can be observed, though, that around Europe, consumers are changing preferences: from sweeter to more healthier drinks. It is hard to predict what the future will look like, and therefore, we need to act step by step, and readjust our goals towards that: hence, the 10%.
The industry will raise the minimum age limit to 13 years old (before it was 12). Could you tell us more about the rationale behind this decision? Why has 13 been set as the minimum age?
Since 2006, when the restrictions have been introduced, we changed practices a lot. Our restrictions are in fact quite advanced and much broader than other players’ measurements. We are not limiting the threshold to certain products only, but apply them to the full range of products our member offer.
13 has been set as the minimum age based on cultural and social developments. Social media, such as Facebook and Instagram, who set their minimum user age at 13, also played a major role in our decision, and even age restrictions foreseen by the GDPR. We raised the age level and we also don’t sell in EU primary schools, and we only sell no- and low-calorie drinks in EU secondary schools.
Recycling (glass, tin, plastic) in most of Europe has been standardized. In other parts of the world, this is not quite the case. Even in some parts of the US, recycling is not practiced. What are the challenges? Why has it taken some parts of the world so long to implement recycling strategies?
Recycling needs a good system to be able to work. The right framework has to be created, both politically, but also logistically, and this requires financing. Major investments are needed in recycling and collection, and to build the overall infrastructure, something that pays off and pays back in the long run. Of course, it can be hard to persuade consumers to pay more, even if it’s just a deposit, especially in developing or poorer countries.
UNESDA believes that investment in return schemes is needed, and in addition to this, the European Commission needs to issue minimum requirements for bottle collection. Only then it becomes easier to go to other countries and ask for these steps. Outside help and guidance is needed. In countries where bottle collection is in place, collections hit above 90%.
What is the outlook for the industry in 2022 and the years ahead? Will the effects of the pandemic continue to be felt in the years to come?
Once the pandemic is over, our industry will definitely continue to use traditional distribution channels, and 2021 will probably look better than 2020 in terms of sales, now that hopefully everything is getting back to normal. A long lasting effect however, is definitely the industry’s exploration of e-commerce services. In addition, the pandemic has led to more health awareness among consumers. There is a certain new way of appreciation for health and nutrition that Covid-19 has created.
